Rogers Corporation Reports Q4, Full Year 2023 Results

Estimated reading time: 4 minutes

Rogers Corporation announced financial results for the full year and fourth quarter of 2023.

"We made significant progress this past year as we drove structural cost improvements, secured new design wins, generated solid free cash flow, and invested in targeted capacity expansions to drive future growth,” stated Colin Gouveia, Rogers' President and CEO. "In the fourth quarter, the macroeconomic headwinds we faced throughout 2023 persisted, resulting in further inventory destocking by customers and softness in many end markets. The lower sales volumes, especially in industrial and portable electronics markets, more than offset our cost improvements in the quarter and resulted in lower gross margins. Looking ahead, we anticipate the demand environment will remain challenging in the first quarter, but that we will begin to see some improvement midyear. We will continue to navigate the dynamic conditions with a clear focus on executing our strategy and managing what is within our control."

Q4 2023 Summary of Results

Net sales of $204.6 million decreased 10.7% versus the prior quarter resulting from lower sales in the AES and EMS business units. AES net sales decreased by 7.2% primarily related to lower aerospace and defense (A&D), renewable energy sales, partially offset by higher EV/HEV sales. EMS net sales decreased by 14.9% primarily from lower portable electronics and general industrial sales, partially offset by higher EV/HEV sales. Currency exchange rates unfavorably impacted total company net sales in the fourth quarter of 2023 by $1.9 million compared to the prior quarter.

Gross margin decreased to 32.9% from 35.1% in the prior quarter due to lower sales volume and factory throughput, partially offset by procurement cost savings.

Selling, general and administrative (SG&A) expenses increased by $7.6 million from the prior quarter to $51.8 million. The higher SG&A expense was due primarily to an increase in professional service fees and compensation costs.

GAAP operating margin of 14.9% increased from 11.8% in the prior quarter. The higher operating margin was primarily due to an increase in other operating income, partially offset by a decline in gross margin and higher SG&A expenses. The increase in other operating income was mainly related to a $24.0 million insurance recovery received in the fourth quarter, in connection with the fire that occurred at the UTIS facility in 2021. Adjusted operating margin of 6.3% decreased by 800 basis points versus the prior quarter due to a decline in gross margin and higher SG&A expenses.

GAAP earnings per diluted share were $1.24 compared to earnings per diluted share of $1.02 in the previous quarter. The increase in GAAP earnings per diluted share was due to the increase in operating income and lower tax expense. On an adjusted basis, earnings were $0.60 per diluted share compared to adjusted earnings of $1.24 per diluted share in the prior quarter.

Ending cash and cash equivalents were $131.7 million, an increase of $5.2 million versus the prior quarter. Net cash provided by operating activities in the third quarter was $71.9 million, capital expenditures were $22.5 million and a principal payment of $50 million was made on the outstanding borrowings under the Company’s revolving credit facility.

Full Year 2023 Summary of Results

Net sales of $908.4 million decreased by 6.5% compared to 2022, from lower sales in the AES and EMS business units.

AES net sales declined in the A&D, wireless infrastructure and EV/HEV markets, partially offset by higher renewable energy and ADAS sales. EMS net sales decreased from lower general industrial, consumer and portable electronics market sales, partially offset by higher A&D sales. Currency exchange rates unfavorably impacted total company net sales in 2023 by $3.3 million compared to the prior year.

Gross margin increased to 33.8% from 33.1% in 2022. The improvement in gross margin mainly resulted from lower logistics costs, procurement cost savings and factory optimization initiatives, which were partially offset by lower volumes and unfavorable mix.

SG&A expenses decreased by $16.5 million from the prior year to $202.3 million, primarily due to lower compensation costs and professional services.

GAAP operating margin decreased to 9.4% from 14.9% in the prior year, primarily due to an decrease in other operating income, partially offset by lower impairment and restructuring charges and SG&A expense. Other operating income decreased from the receipt in 2022 of a $142.1 million regulatory termination fee, net of transaction expenses, which was partially offset by $31.4 million of insurance recoveries received in 2023. The insurance recoveries were in connection with the fire that occurred at the UTIS facility in 2021. Adjusted operating margin was 11.2%, compared to 11.7% in 2022.

GAAP earnings per diluted share were $3.03, compared to $6.15 per diluted share, for full year 2022. The decrease resulted primarily from lower operating income, partially offset by lower tax expense. On an adjusted basis, earnings were $3.78 per diluted share for full year 2023, compared to $4.91 per diluted share for full year 2022.

Ending cash and cash equivalents of $131.7 million decreased by $104.2 million versus the prior year. The Company generated operating cash flow of $131.4 million, had capital expenditures of $57.0 million, and principal payments of $185 million were made on the outstanding borrowings under the Company’s revolving credit facility.

Extending Financial Targets Beyond 2025

As a result of persistent challenges in the global manufacturing economy and a lack of near-term visibility to the rate of growth in the electric vehicle market, the timeline to achieve the previously issued targets of $1.2 to $1.3 billion in sales, 38% to 40% gross margin, and adjusted earnings per share of $8.50 to $9.50 is being extended beyond 2025. Rogers expects to provide an update on the timing of achieving these targets once demand visibility has improved.

"Our view of Rogers' potential, and the compelling growth opportunities projected in our key markets, such as EV/HEV, has not changed,” stated Colin Gouveia, Rogers' President and CEO. "As a result of current market challenges and the uncertain timing of EV growth, we are extending these targets beyond 2025. We continue to have great confidence in our strategy and capabilities, which will enable us to reach these objectives."